Amazon’s Profit Doubles, To Raise Membership Fees
Amazon’s profit nearly doubled in the fourth quarter as the e-commerce giant was able to offset the rising costs of running its vast e-commerce business with its investment in Rivian, an electric car company. The company also said it would raise the price of its popular Prime membership.
According to CNET, net sales in the October-December quarter, which includes the all-important holiday season, rose nine per cent to $137.4bn. That narrowly missed the $137.6bn average that analysts had expected, according to Yahoo. The performance was buoyed by sales in Amazon’s ad services and cloud computing sector, which compensated for muted consumer retail spending.
Still, earnings per share almost doubled to $27.75 and trounced analysts expectations of $3.48. Amazon Chief Financial Officer Brian Olsavsky credited the IPO of Rivian, which Amazon had invested in, for boosting net income by $11.8bn. At the operating level, which doesn’t include the proceeds of investments, operating income nearly halved to $3.5bn.
Amazon share prices rose after the company released its report, climbing more than 14% in value after a closing price of $2,777.
The drop in operating income highlights the rising cost of labor and logistics costs, expenses Amazon had indicated last year would affect its business as 2021 came to a close. Consumer spending did little to offset those costs, with Amazon’s direct retail business growing a slim 1 per cent in the fourth quarter, compared with a 43 per cent growth rate a year earlier. Holiday shopping fueled a 12 per cent growth rate at the company’s marketplace of third-party sellers in 2021, compared with 54 per cent in the 2020 holiday season.
One way Amazon will address the growing cost of labor and logistics is by raising Amazon Prime membership. Monthly memberships will jump to $15 from $13, while annual memberships will rise to $139 from $119. The changes, the first since 2018, will begin on Feb. 18 for new members and after March 25 for existing members.
